Impossibility of Performance. John Agosta and his brother Salvatore had formed a corporation, but disagreements between the two brothers caused John to petition for voluntary dissolution of the corporation. According to the dissolution agreement, the

Question

total assets of the corporation, which included a warehouse and inventory, would be split between the brothers by Salvatore's selling his stock to John for $500,000. This agreement was approved, but shortly before the payment was made, a fire totally destroyed the warehouse and inventory, which were the major assets of the corporation. John refused to pay Salvatore the $500,000, and Salvatore brought suit for breach of contract. Discuss whether the destruction of the major assets of the corporation affects John's required performance.

Answer 1

Impossibility of performance
The answer to whether the contract can be specifically enforced or John's nonperformance can be excused hinges on how the agreement was classified. Here, the court viewed the agreement as a purchase and sale of the corporate stock rather than as a purchase and sale of a functionary business. Additionally, John cannot avoid the contract due to the decline in the value of the stock as a result of the fire. The subject matter of the agreement, the shares of stock, were not destroyed, and therefore the doctrine of impossibility of performance does not apply and John cannot avoid the contract.